Correlation Between Tidal Trust and FT Vest

Can any of the company-specific risk be diversified away by investing in both Tidal Trust and FT Vest at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tidal Trust and FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tidal Trust II and FT Vest Equity, you can compare the effects of market volatilities on Tidal Trust and FT Vest and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tidal Trust with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and FT Vest.

Diversification Opportunities for Tidal Trust and FT Vest

0.48

Correlation Coefficient

Tidal Trust  FT Vest

Very weak diversification

The 3 months correlation between Tidal and DHDG is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and Tidal Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tidal Trust II are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Tidal Trust i.e., Tidal Trust and FT Vest go up and down completely randomly.

Pair Corralation between Tidal Trust and FT Vest

Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the FT Vest. In addition to that, Tidal Trust is 10.77 times more volatile than FT Vest Equity. It trades about -0.13 of its total potential returns per unit of risk. FT Vest Equity is currently generating about 0.09 per unit of volatility. If you would invest  3,038  in FT Vest Equity on September 26, 2024 and sell it today you would earn a total of  54.00  from holding FT Vest Equity or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	23.91%
Values	Daily Returns

Tidal Trust II  vs.  FT Vest Equity

Tidal Trust II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal Trust II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

FT Vest Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tidal Trust and FT Vest

The main advantage of trading using opposite Tidal Trust and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, FT Vest can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FT Vest will offset losses from the drop in FT Vest's long position.

The idea behind Tidal Trust II and FT Vest Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.